Software stocks sink, led by declines from Figma, Datadog
Software stocks fell Thursday after quarterly results from Datadog, Figma, and HubSpot. Datadog shares dropped more than 15% despite beating revenue and earnings; adjusted gross margin was 80% versus 80.7% consensus. Figma also fell after warning of higher AI inference spending. iShares Expanded Tech-Software ETF (IGV) fell over 2%.
How this was made
The 30-second read
Why it matters
The article links the sharp declines to earnings reactions and, for Figma and Datadog, highlights specific margin and AI inference cost concerns that can change near-term expectations.
Market read
This is a sector-wide earnings reaction where AI-related cost structure and gross margin sensitivity are driving outsized downside in leading software names.
What to watch
The article lacks company-specific details for several names (CRM, NOW, WDAY, NET, HUBS), so some of the move may be mechanical sector beta rather than fundamental deterioration.
Background
Software stocks were attempting a rebound since April lows, but investors have been worried AI will disrupt business models and are scrutinizing earnings closely.
Ticker impact
Datadog shares fell more than 15% after quarterly results, despite beating top and bottom lines, with adjusted gross margin slightly below consensus.
Bearish bias for the next few sessions as investors reprice AI inference cost risk versus revenue offsets.
The article attributes the >15% drop directly to the quarterly results and highlights a specific margin miss and AI scrutiny.
Figma shares plummeted more than 15% after results, as the company flagged rising AI inference spending that can pressure gross margin.
Further downside or high volatility likely until investors gain clarity on how quickly inference costs convert to monetization.
The article includes a CFO quote explaining why gross margin will vary, directly linking the selloff to AI inference economics.
HubSpot shares dropped more than 15% following quarterly results, contributing to the broad software selloff led by Datadog and Figma.
Negative near-term tape action likely, but conviction is lower because the article provides no HubSpot-specific financial detail.
The article states the magnitude of the drop but does not disclose HubSpot-specific drivers beyond the general AI scrutiny theme.
Salesforce shares also fell alongside the earnings-driven software selloff, reflecting sector-wide risk repricing around AI disruption concerns.
Short-term bearish drift possible as investors extend the read-across from peers' earnings.
The article mentions CRM price decline but provides no CRM-specific earnings or guidance details.
ServiceNow shares dropped with the group after peers' quarterly results, indicating investors are applying the same AI earnings scrutiny across software.
Near-term downside risk remains elevated while the market digests AI cost and margin implications across the sector.
The text cites NOW as part of the decline but does not provide NOW-specific disclosures.
Workday shares fell with other software peers after quarterly results triggered a broader selloff led by Datadog and Figma.
Potential for continued volatility with the sector until company-specific earnings details emerge.
The article provides only that WDAY dropped, without WDAY-specific financial or guidance information.
Cloudflare shares declined alongside the software group after quarterly results, as investors scrutinized AI disruption and earnings margins.
Short-term bearish bias likely, but catalyst attribution is weak without NET-specific details.
The article lists NET among decliners but does not include NET metrics or guidance.
Market effects
Reinforces that AI inference cost and gross margin volatility are being punished in software earnings, raising the bar for AI monetization narratives.
Primarily US-listed software tape impact; could spill into broader growth/tech sentiment.
Global software investors may apply similar AI cost read-across when evaluating earnings quality and guidance.
Counterpoint
The selloff may overreact to near-term gross margin variability, especially if AI costs are transitional and monetization ramps later.
Key entities
- companyDatadog
Quarterly results beat, but adjusted gross margin was slightly below consensus, and shares fell more than 15%.
- companyFigma
Quarterly results beat, but management flagged rising AI inference spending that can cause gross margin to vary.
- companyHubSpot
Shares fell more than 15% after quarterly results as part of the broader software selloff.
- ETFiShares Expanded Tech-Software Sector ETF
IGV fell more than 2% on Thursday, reflecting sector-wide pressure.
